Sunday, April 1, 2012

Rising Risk: Foreign Firms Sense Hostility in India

Tax and Policy proposals has increased the perception that business environment is hostile. Indeed, the new Chair of Greater Dallas Indian Chamber of Commerce Mr. Sunil Maini, who resides in Plano, Texas, can make a difference to this situation in India.

Plano is a city which pioneered giving tax breaks to companies, as it did with JC Penney and EDS in 1986-87, that uplifted the whole economy of Plano, Texas. Contrast that with Garland, Texas where the elders did not want to give tax breaks to JC Penny, Dallas residents did not want to give tax incentives to the football stadium, that went to Arlington, Garland resisted the town east mall, Mesquite got it. For the last 15 years, the Citizens of Dallas have not passsed the bond to complete the project River Walk, the likes of San Antonio, that will burst our economy... It is all lack of leadership world wide.

I am considering consulting with the business leaders to start on campaigns to bring about a positive change for growth. Way back when the Diboll project was in doldrums in Maharashtra, Enron had contacted me to do their PR to turn the hostility into a conducive environment... I actually talke to the guy who is in Federal Penitentiary for all the robbing he did. Thank God, I was not a part of that. Mike GhouseSelect India Articles about India at http://mikeghouseforindia.blogspot.com

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Tax proposals in the national budget unveiled in March stunned foreign firms. They could create significant retroactive tax liabilities for international mergers stretching back a half-century and eliminate a tax exemption many investors now have, wreaking havoc on corporate deal making, legal experts say. More than a half-billion dollars in foreign capital has left the Indian stock market in recent days.

The government also singled out a U.K.-based oil producer for a multibillion-dollar levy that the company calls discriminatory. Internet executives fromGoogle Inc. GOOG -0.32% and Facebook Inc. are facing criminal prosecution for not removing Web content that some consider objectionable even though the companies have said they followed the letter of the law. And long-promised efforts to liberalize foreign investment in the retail, defense and insurance sectors have stalled.

Foreign companies long have braved the risks of corruption and a stifling bureaucracy in the hopes of capitalizing on the fast-growing emerging Indian market. And New Delhi has done its part to court foreigners at international events like the World Economic Forum's annual conference in Davos, Switzerland. But the tax proposals, which are set for an April vote in Parliament and designed to reduce a yawning budget deficit, have helped heighten anxiety about doing business here.

"In the scramble to generate tax dollars, the government will go after soft targets," said Saurabh Mukherjea, head of equities at Ambit Capital, a Mumbai-based boutique investment bank. "Foreigners, whether they be companies or investors, are obvious soft targets since they don't have an impact on the government's electoral fortunes."

One of the budget proposals would allow authorities to tax transactions dating to 1962 in which an Indian asset has been transferred between two foreign entities. That essentially would override an Indian Supreme Court ruling in January that U.K. mobile-phone companyVodafone GroupVOD -0.82% PLC isn't liable for over $2 billion in taxes on the 2007 deal it struck to enter India.

Foreign investors have viewed India's court system, while clunky, as relatively reliable and independent. But the government's proposal to negate the ruling has left the impression that court decisions no longer are final.

Another provision in the budget would increase taxes on oil production by 80%. The only private company affected would be India's largest oil producer, Cairn India Ltd., whose major stakeholders are Vedanta Resources VED.LN +1.98% PLC and Cairn Energy CNE.LN -0.40% PLC, both of the U.K. Cairn India has said the tax increase would cost the company $2.5 billion through 2020 and could discourage its plans to invest $6 billion in India.

"The government has been desperately trying to attract investment in the oil-and-gas sector and it hasn't worked," Cairn India Chief Executive Rahul Dhir said in an interview. "This will just create further disincentives to invest."

Traffic moves past a Levi's showroom in Mumbai. Indian tax proposals have rattled some foreign businesses.

The government has said it needs to increase revenue to offset its higher energy costs. The Petroleum Ministry didn't respond to a request for comment for this article.

U.K. Chancellor of the Exchequer George Osborne will be in New Delhi Monday for an annual meeting with Indian Finance Minister Pranab Mukherjee and is expected to discuss the need for predictability in India's business environment.

In a speech here Monday to an Indian trade group, U.S. Commerce Secretary John Bryson spoke glowingly of burgeoning U.S.-India trade ties. But he also ticked off a list of U.S. concerns about tariffs on items such as grapes and citrus fruits and about Indian restrictions on imports of foreign-made solar-power equipment.

U.S. officials in recent meetings with their Indian counterparts also have raised concerns about the retrospective tax proposal.

The Indian Finance Ministry didn't respond to requests for comment for this article, though the government has said it is committed to fostering a hospitable environment for investors.

The Indian economy is expected to have grown 6.9% in the fiscal year that ends Friday. That is strong by global standards but not strong enough for India to raise living standards for its hundreds of millions people in poverty, economists say.

Foreign direct investment in India was $27.6 billion last year, rebounding to around its 2009 level after a barrage of corruption scandals caused a slump. And the moves to boost government revenue through taxes on foreign companies are intended to help close a budget deficit that is 5.9% of gross domestic product, analysts say.

But foreign investors have complained about another budget proposal set to take effect April 1 that will let tax authorities crack down on "tax avoidance." It puts the onus on companies, many of them foreign, to show that they didn't structure corporate deals to avoid taxes.

Investors have expressed concern that the new policy would override India's tax treaty with Mauritius, which exempts companies operating there from capital-gains tax in India. Foreign funds, including many U.S. asset managers, that have invested in Indian stocks and bonds through Mauritius subsidiaries now could face unexpected taxes when they sell shares, some analysts say. The move also could affect participatory notes, derivatives that foreign funds use to invest in India.

India's stock market has seen a net outflow of $692.46 million in foreign capital in the past three days as investors anticipate the tax-avoidance rule going into effect.

Bobby Parikh, of consulting firm BMR Advisors, said the new policy will change foreign funds' calculations about the potential profits from investing in India and it "may cease to be an attractive market."

Mr. Mukherjee, the finance minister, has said that the new tax rules are intended "to counter aggressive tax avoidance schemes" and that the goal isn't to target portfolio investments.

Meanwhile, efforts to attract more foreign direct investment have been stalled by a lack of political consensus. The government of Prime Minister Manmohan Singh backtracked last year on plans to allow investments by big-box, multibrand foreign retailers such asWal-Mart Stores Inc., WMT +0.60% after critics said the move would crush mom-and-pop shopkeepers.

India in January opened the door for single-brand retailers such as IKEA Systems BV to control 100% of Indian ventures. But some companies said restrictions were onerous. The new policy requires retail foreign investors to obtain 30% of their products from Indian small businesses, and few foreign companies have shown interest in the new opportunity. IKEA said it is evaluating the guidelines and whether it wants to set up stores in India.

Armando Branchini, executive director of Fondazione Altagamma, which promotes high-end Italian companies including Bottega Veneta, Ferrari and Versace overseas, said the new policy "is a joke" in its current form.

He said Indian consumers aren't going to buy Indian-made luxury items like Rolexes or Ferraris if consumers assume there will be a quality difference with foreign-made products. India is trying "to decide and shape what has to be the business model of a company," he said. "It's a totally arbitrary approach and not understandable."

INDIAN FLAG

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Indian Heroes

Patriotism

Upright Beauracrats

Community information

REAL ESTATE IN INDIA

INDIAN HEROES

These are the men and women from among Hindus, Dalits, Adivasis, Muslims, Sikhs, Christians, Jains, Buddhists, Zoroastrians, Jews, and other traditions that are deeply committed to the idea of One India and one people acknowledging the uniqueness of each one of the Indians.

Their work brings people together, their effort is to restore harmony among Indians unlike some lost souls who are hell bent on pitting one Indian against the other.

Lord Krishna had said, whenever the negative forces become stronger in dividing families and disrupt peace and harmony, he will emerge among them to restore sanity, the same idea is reflected in Quran, that God does not deprive his goodness to anyone and sends a peacemaker to every community and nation. After the founding fathers of the nation, these are our real heroes restoring dharma – the righteousness. Dharma is when people get along, mind their own business, live their lives and let others live theirs. God has created all of us and respects each one of us is the highest form of worship.

I salute them for their work and they come from all walks of life. They see you as an Indian and nothing but an Indian. They believe every human should be free to eat, drink, wear or believe whatever he or she wants in the pursuit of their happiness.

Please share stories of such Indians who have made efforts to build a cohesive India, an India where no Indian lives in apprehension, tension or fear of the other.

INDIAN HEROES - NEW FROM 12/20/17

PATRIOTISM

Two of India’s dangerous trends: Misplaced Patriotism and intolerance towards different points of view.

The real heroes of India are those who relentlessly “criticize” the government because they do not want their government to falter and make decisions that will mess up the social structure of the nation. They keep the government rascals on their toes. After all, they are elected to serve us not the other way around. The real heroes rise the nation for the common good of all.

What do the Chamchas on the other hand do? They wear a false badge of patriotism and to them patriotism is oppression of those who differ, and war mongering. They cannot handle criticism of government, they are yes sir, yes sir I lick your chappals. They bring down the nation by keeping their man at helm in a bubble giving him or her false assurance that everything is alright.

I hope the Prime Minister wises up and invites and honors those who criticize him, they are the real supporters of him by reminding him from falling into the pit. He should welcome all those who criticize. He needs to defend the rights of such heroes. The Indian Citizens on the other hand need to make a conscious effort to support those who criticize the government, BJP or Congress or any one.

The test of a successful civilized nation is when every man and woman of India can breathe, eat, drink, wear and believe whatever the hell she or he wants to believe.

UPRIGHT BUREAUCRATS

These are the public service heroes; officers who go against their political bosses to do the right thing for India, i.e, every Indian. We will be developing the list as we go forward. You can send in your entries to MikeGhouseforIndia@gmail.com

UPRIGHT BUREAUCRATS

ABOUT MIKE GHOUSE

Mike Ghouse is committed to his life mission of building cohesive work places, communities and nations. His work is for the Indians and Americans where each one of the 322 million Americans should feel secure without apprehension or fear of the other.

He is one of the 5 people in the world who is actively pursuing research, activism and teaching the subject of Pluralism. Just Google and find a tremendous amount of work on pluralism in religion, politics, society and culture. Mike defines Pluralism as an attitude of “respecting the otherness of other” and accepting the God-given uniqueness of each one of us.

He is a pluralist, thinker, writer, activist and a speaker on Pluralism, Interfaith, politics, Islam, human rights and foreign policy including India and Israel-Palestine. He is a news maker, interfaith wedding officiant and a community consultant and offers pluralistic solutions on issues of the day.

Dr. Ghouse has appeared in over 300 National TV shows and is a frequent guest with Hannity and Varney shows at Fox News along with others. He has over 1000 hours of Radio Shows of which 700 were dedicated to interfaith and pluralism. Over 3500 articles have been published of which a 1000 were on politics, foreign policy, sports and movies, a 1500 for interfaith and pluralism matters and a 1000 plus on Islam. In addition Mike has conducted workshops on Atheist to Zoroastrian and every one in between.

Mike is committed to building cohesive societies and offers pluralistic solutions on issues of the day. His work is at www.Centerforpluralism.com and www.WorldMuslimCongress.org

Welcome

We are proud of our heritage - a multi-faith, multi-cultural, multi-regional and multi-linguistic society, where we have come to accept and respect every which way people have lived their lives. For over 5000 years, India has been a beacon of pluralism - it has embraced Islam, Christianity, Judaism, Baha’i and Zoroastrianism to include in the array of the indigenous religions; Hinduism, Jainism, Buddhism and Sikhism. India led the way to the freedom movement, since 1947 every country has been liberated from colonialism. Indian democracy is a shining example to the world, where the people have peacefully transferred the powers. Indians are inherently secular and economically capitalistic. They believe in "live-and-let-live" life style, which is the essence of capitalism.Through the years we have expressed the highest degree of maturity on handling extreme situations; the more divergent opinions we hear, the larger our heart grows, the bigger our embrace would be and we can cushion more differences. Let’s continue to honor the concept that there is always another side to the story, as finding the truth is our own responsibility.I am proud of my heritage and am proud to be an Indian-American. Please join me in the discovery of India on a daily basis, as time permits and share the wealth of knowledge you have on this forum.

DallasIndians@yahoogroups.com is the information exchange center for the Indian community living in the Dallas/ Fort Worth Metroplex. You can join by sending an email to: DallasIndians-Subscribe@yahoogroups.com